**Exhibit 10.16****AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT**
 

	This Amendment Number Three to Loan and SecurityAgreement ("Amendment") is entered into as of January __, 2000, by andbetween **FOOTHILL CAPITAL CORPORATION,**a California corporation("Foothill"), and **SILICON STORAGE TECHNOLOGY, INC.,**a Californiacorporation ("Borrower"), in light of the following:

	A.	Borrower and Foothill have previously entered intothat certain Loan and Security Agreement, dated as of September 22, 1998 asamended on December 8, 1998  and September 30, 1999 (the"Agreement").

	B.	Borrower and Foothill desire to further amend theAgreement as provided for and on the conditions herein.

	NOW, THEREFORE, Borrower and Foothill hereby amend andsupplement the Agreement as follows:
**DEFINITIONS
.
  All initially capitalizedterms used in this Amendment shall have the meanings given to them in theAgreement unless specifically defined herein.

**AMENDMENTS
.

Section 1.1 of the Agreement is amended to add oramend the following definitions:

		"L/C" has the meaning set forth inSection 2.2(a).
		"L/C Guaranty" has the meaning setforth in Section 2.2(a).
		"Letter of Credit" means an L/C oran L/C Guaranty, as the context requires.
The definition of Maximum Revolving Amount in Section 1.1of the Agreement is amended to read as follows:

		"Maximum Revolving Amount" means thefollowing, as applicable:
		"(a)	$35,000,000 minus the amount of theoutstanding balance of all undrawn or unreimbursed Letters of Credit, and minusthe amount of the outstanding Capital Expenditure Loans from October 1, 1999through the earlier to occur of (i) timely receipt by Foothill of financialstatements for the period ending November 30, 1999 or the period endingDecember 31, 1999 reflecting, to Foothill's satisfaction,  that Borrower hasachieved the Minimum Cumulative EBIT for such period then ending (in eithercase, the "Initial EBIT Compliance Documentation"), or (ii) failure ofBorrower to timely deliver financial statements for any period ending on orafter December 31, 1999 evidencing that  Borrower has  achieved the MinimumCumulative EBIT for such period (an "EBIT Noncompliance Event");
		(b)	$50,000,000 minus the amount of theoutstanding balance of all undrawn or unreimbursed Letters of Credit, and minusthe amount of the outstanding Capital Expenditure Loans from January 1, 2000through March 31, 2000 so long as Borrower has timely delivered the Initial EBITCompliance Documentation to Foothill;
		(c)	In the event that the Maximum Revolving Amounthas been increased to $50,000,000 pursuant to (b) above, such amount shall bereduced to $40,000,000 minus the amount of the outstanding balance of allundrawn or unreimbursed Letters of Credit, and minus the amount of theoutstanding Capital Expenditure Loans from April 1, 2000 through May 31,2000;
		(d)	$25,000,000 minus the amount of theoutstanding balance of all undrawn or unreimbursed Letters of Credit, and minusthe amount of the outstanding Capital Expenditure Loans at all times on or afterthe earlier to occur of (i) July 1, 2000, and (ii) an EBIT NoncomplianceEvent."
Section 2.1(a) of the Agreement is amended to read asfollows:

		"(a)	Subject to the terms and conditions ofthis Agreement, Foothill agrees to make advances ("Advances") toBorrower in an amount outstanding not to exceed at any one time the lesser of(i) the Maximum Revolving Amount less the outstanding balance of all undrawn orunreimbursed Letters of Credit, or (ii) the Borrowing Base less the aggregateamount of all undrawn or unreimbursed Letters of Credit.  For purposes of thisAgreement, "Borrowing Base", as of any date of determination, shallmean the result of:
			(x)	the lesser of (i) 80% of the value ofEligible Accounts, less the amount, if any, of the Dilution Reserve, or (ii) anamount equal to Borrower's Collections with respect to Accounts for theimmediately preceding 90 day period, *minus*
			(y)	the aggregate amount of reserves, ifany, established by Foothill under Sections 2.1(b), 6.15, and10."

The Agreement is amended to add Section 2.2 asfollows:

		**"2.2	Letters ofCredit.**
			(a)	Subject to the terms and conditions ofthis Agreement, Foothill agrees to issue letters of credit for the account ofBorrower (each, an "L/C") or to issue guarantees of payment (each suchguaranty, an "L/C Guaranty") with respect to letters of credit issuedby an issuing bank for the account of Borrower.  Foothill shall have noobligation to issue a Letter of Credit if any of the following would result:

				(i)	the sum of 100% of the aggregateamount of all undrawn and unreimbursed Letters of Credit, would exceed theBorrowing Base less the amount of outstanding Advances; or

				(ii)	the aggregate amount of all undrawnor unreimbursed Letters of Credit would exceed the lower of: (x) the MaximumRevolving Amount less the amount of outstanding Advances; or (y) $10,000,000through March 31, 2000, $8,000,000 from April 1, 2000 through May 31,2000, $7,000,000 from June 1, 2000 through June 30, 2000 and$5,000,000 at all times on or after July 1, 2000.

Borrower expressly understands and agrees that Foothill shallhave no obligation to arrange for the issuance by issuing banks of the lettersof credit that are to be the subject of L/C Guarantees.  Borrower and Foothillacknowledge and agree that certain of the letters of credit that are to be thesubject of L/C Guarantees may be outstanding on the Closing Date.  Each Letterof Credit shall have an expiry date no later than 60 days prior to the date onwhich this Agreement is scheduled to terminate under Section 3.4 (withoutregard to any potential renewal term) and all such Letters of Credit shall be inform and substance acceptable to Foothill in its sole discretion.  If Foothillis obligated to advance funds under a Letter of Credit, Borrower immediatelyshall reimburse such amount to Foothill and, in the absence of suchreimbursement, the amount so advanced immediately and automatically shall bedeemed to be an Advance hereunder and, thereafter, shall bear interest at therate then applicable to Advances under Section 2.6.

			(b)	Borrower hereby agrees to indemnify, save,defend, and hold Foothill harmless from any loss, cost, expense, or liability,including payments made by Foothill, expenses, and reasonable attorneys feesincurred by Foothill arising out of or in connection with any Letter of Credit.Borrower agrees to be bound by the issuing bank's regulations andinterpretations of any letters of credit guarantied by Foothill and opened to orfor Borrower's account or by Foothill's interpretations of any Letter of Creditissued by Foothill to or for Borrower's account, even though this interpretationmay be different from Borrower's own, and Borrower understands and agrees thatFoothill shall not be liable for any error, negligence, or mistake, whether ofomission or commission, in following Borrower's instructions or those containedin the Letter of Credit or any modifications, amendments, or supplementsthereto.  Borrower understands that the L/C Guarantees may require Foothill toindemnify the issuing bank for certain costs or liabilities arising out ofclaims by Borrower against such issuing bank.  Borrower hereby agrees toindemnify, save, defend, and hold Foothill harmless with respect to any loss,cost, expense (including reasonable attorneys fees), or liability incurred byFoothill under any L/C Guaranty as a result of Foothill's indemnification of anysuch issuing bank. 

			(c)	Borrower hereby authorizes and directs anybank that issues a letter of credit guaranteed by Foothill to deliver toFoothill all instruments, documents, and other writings and property received bythe issuing bank pursuant to such letter of credit, and to accept and rely uponFoothill's instructions and agreements with respect to all matters arising inconnection with such letter of credit and the related application.  Borrower mayor may not be the "applicant" or "account party" withrespect to such letter of credit.

			(d)	Any and all charges, commissions, fees,and costs incurred by Foothill relating to the letters of credit guaranteed byFoothill shall be considered Foothill Expenses for purposes of this Agreementand immediately shall be reimbursable by Borrower to Foothill.

			(e)	Immediately upon the termination of thisAgreement, Borrower agrees to either (i) provide cash collateral to be held byFoothill in an amount equal to 105% of the maximum amount of Foothill'sobligations under outstanding Letters of Credit, or (ii) cause to be deliveredto Foothill releases of all of Foothill's obligations under outstanding Lettersof Credit.  At Foothill's discretion, any proceeds of Collateral received byFoothill after the occurrence and during the continuation of an Event of Defaultmay be held as the cash collateral required by this Section 2.2(e).

			(f)	If by reason of (i) any change in anyapplicable law, treaty, rule, or regulation or any change in the interpretationor application by any governmental authority of any such applicable law, treaty,rule, or regulation, or (ii) compliance by the issuing bank or Foothill with anydirection, request, or requirement (irrespective of whether having the force oflaw) of any governmental authority or monetary authority including, withoutlimitation, Regulation D of the Board of Governors of the Federal Reserve Systemas from time to time in effect (and any successor thereto):

				(A)	any reserve, deposit, or similarrequirement is or shall be imposed or modified in respect of any Letters ofCredit issued hereunder, or

				(B)	there shall be imposed on the issuingbank or Foothill any other condition regarding any letter of credit, or Letterof Credit, as applicable, issued pursuant hereto;

and the result of the foregoing is to increase, directly orindirectly, the cost to the issuing bank or Foothill of issuing, making,guaranteeing, or maintaining any letter of credit, or Letter of Credit, asapplicable, or to reduce the amount receivable in respect thereof by suchissuing bank or Foothill, then, and in any such case, Foothill may, at any timewithin a reasonable period after the additional cost is incurred or the amountreceived is reduced, notify Borrower, and Borrower shall pay on demand suchamounts as the issuing bank or Foothill may specify to be necessary tocompensate the issuing bank or Foothill for such additional cost or reducedreceipt, together with interest on such amount from the date of such demanduntil payment in full thereof at the rate set forth in Section 2.6(a)(i)or (c)(i), as applicable.  The determination by the issuing bank orFoothill, as the case may be, of any amount due pursuant to this Section2.2(f), as set forth in a certificate setting forth the calculation thereofin reasonable detail, shall, in the absence of manifest or demonstrable error,be final and conclusive and binding on all of the parties hereto."

Sections 2.6(a), (b), (c) and (e) of the Agreement areamended to read as follows:

		"(a)	Interest Rate.  Except as provided inSection 2.6(c), below, all Obligations shall bear interest on the DailyBalance as follows:

			(i)	each Eurodollar Rate Loan shall bearinterest at a per annum rate of 3.00 percentage points above the AdjustedEurodollar Rate; and

			(ii)	all other Obligations (except for undrawnLetters of Credit) shall bear interest at a per annum rate of 0.50 percentagepoints above the Reference Rate.

		(b)	Letter of Credit Fee.  Borrower shall payFoothill a fee (in addition to the charges, commissions, fees, and costs setforth in Section 2.2(d)) equal to 1.00% per annum times the aggregate undrawnamount of all Letters of Credit outstanding as of the end of each day."

(c)	Default Rate.  Upon the occurrence and during thecontinuation of an Event of Default, (i) all Obligations (except for undrawnLetters of Credit) shall bear interest on the Daily Balance at a per annum rateequal to 4.50 percentage points above the Reference Rate, and (ii) the Letter ofCredit fee provided in Section 2.6(b) shall be increased to 5.00% perannum times the aggregate undrawn amount of all Letters of Credit outstanding asof the end of each day."

		"(e)	Payments.  Letter of Credit fees andinterest in respect of Reference Rate Loans payable hereunder shall be due andpayable, in arrears, on the first day of each month during the term hereof.Interest in respect of each Eurodollar Rate Loan shall be due and payable, inarrears, on (i) the last day of the applicable Interest Period, and (ii) thefirst day of each month occurring during the term thereof. Borrower herebyauthorizes Foothill, at its option, without prior notice to Borrower, to chargesuch interest and Letter of Credit fees, all Foothill Expenses (as and whenincurred), the charges, commissions, fees, and costs provided for inSection 2.2(d) (as and when accrued or incurred), the fees andcharges provided for in Section 2.11 (as and when accrued or incurred),and all installments or other payments due under the Capital Expenditure Loans,or any Loan Document to Borrower's Loan Account, which amounts thereafter shallaccrue interest at the rate then applicable to Advances hereunder.  Any interestnot paid when due shall be compounded and shall thereafter accrue interest atthe rate then applicable to Advances hereunder."

Section 2.11(b) of the Agreement is amended to read asfollows:

Unused Line Fee.  On the first day of each month duringthe term of this Agreement, an unused line fee, in an amount equal to 0.25% perannum times the difference between the average daily balance of the Advances andundrawn Letters of Credit that were outstanding during the immediately precedingmonth and the Maximum Revolving Amount for the period commencing October 1, 1999through June 30, 2000.  Thereafter, the unused line fee shall an amountequal to 0.25% per annum times the difference between the average Daily Balanceof the Advances and undrawn Letters of Credit, there were outstanding during theimmediately preceding month and $5,000,000.

The introduction to Section 3.2 of the Agreement isamended to read as follows:

"**3.2	Conditions Precedent to all Advances andLetters of Credit**.  The following shall be conditionsprecedent to all Advances and all Letters of Credit, hereunder:"**REPRESENTATIONS AND WARRANTIES
.
Borrower hereby affirms to Foothill that all of Borrower's representations andwarranties set forth in the Agreement are true, complete and accurate in allrespects as of the date hereof.

**NO DEFAULTS
.  
Borrower hereby affirms toFoothill that no Event of Default has occurred and is continuing as of the datehereof.

**CONDITION PRECEDENT
.  
The effectiveness ofthis Amendment is expressly conditioned upon receipt by Foothill of an executedcopy of this Amendment.

**COSTS AND EXPENSES
.  
Borrower shall pay toFoothill all of Foothill's out-of-pocket costs and expenses (including, withoutlimitation, the fees and expenses of its counsel, which counsel may include anylocal counsel deemed necessary, search fees, filing and recording fees,documentation fees, appraisal fees, travel expenses, and other fees) arising inconnection with the preparation, execution, and delivery of this Amendment andall related documents.

**LIMITED EFFECT
.  
In the event of a conflictbetween the terms and provisions of this Amendment and the terms and provisionsof the Agreement, the terms and provisions of this Amendment shall govern.  Inall other respects, the Agreement, as amended and supplemented hereby, shallremain in full force and effect.

**COUNTERPARTS; EFFECTIVENESS
.  
ThisAmendment may be executed in any number of counterparts and by different partieson separate counterparts, each of which when so executed and delivered shall bedeemed to be an original.  All such counterparts, taken together, shallconstitute but one and the same Amendment.  This Amendment shall becomeeffective upon the execution of a counterpart of this Amendment by each of theparties hereto.

	IN WITNESS WHEREOF, the parties hereto have executed thisAmendment as of the date first set forth above.

					**FOOTHILL CAPITAL CORPORATION,**
					a California corporation

 

By:  /s/  Thomas Sigurdson

Title:  Vice President

 

					**SILICON STORAGE TECHNOLOGY, INC.,**
					a California corporation

 

By:  /s/  Jeffrey L. Garon

Title:  VP/CFO****************